BIR Ruling

April 5, 1976 Sacred Heart Seminary Angeles City, 2017 Attention: Gerard Tangelder Gentlemen : This refers to your letter dated November 20, 1975 requesting this Office to make a ruling on a number of queries based on the following facts: cdta "I. FACTS: The School Board decides to help students in their textbook problems by setting aside a fund to cover the purchase of textbooks to be used exclusively by its students at a nominal rental to amortize the amount spent. The fund will be a sort of revolving fund which will be used again whenever needed to purchase the replacement of worn-out or discarded textbooks. "QUERY : a) Is our seminary considered as engaged in the business of renting personalty and subject to business taxes? b) Is the rental to be considered as income and subject to income tax even though the said amount is only to amortize the cost of the books and no deduction for depreciation of such textbooks is claimed in the returns? "II. FACTS: The seminary is allowed to charge the students various entrance fees payable at the beginning of the school, year which unnecessarily makes the first quarter show an extraordinary big income on the school. "QUERY : In preparing the quarterly tax returns of the school for income tax purposes, will it be in conformity with revenue regulations to distribute these entrance fees equitably over the ten months of the school year since their collection is applicable for the entire school year?" In reply, I have the honor to inform you as follows: Your Seminary is considered a lessor of personal property; hence, it is subject to the fixed annual tax of P50.00 prescribed in Section 182(A)(1) of the Tax Code and to the 3% contractor's tax prescribed in Section 191(17) of the same Code. The renting of textbooks to students by your Seminary falls within the purview of "related school activities" as provided in Section 24(a) of the Tax Code as amended by Presidential Decree Nos. 305 and 778. Accordingly, any income derived by the Seminary from such activity is, beginning the calendar year 1974 or the fiscal year beginning July 1, 1974, includible in the determination of its net income is subject to the 10% tax. Finally, pursuant to Presidential Decree No. 30, the quarterly income tax return should reflect gross income and allowable deductions for the quarter. Such being the case, the total entrance fees paid to the Seminary should be declared in its return for the quarter during which they were collected. aisa dc Very truly yours, EFREN I. PLANA Acting Commissioner of Internal Revenue TAN-1456-040-3